Jarden Wealth Weekly: What is social return on investment and why does it matter?

A new report has outlined the impact of $178 million in charitable sector donations. Photo / 123RF

OPINION

What does it mean to invest in a charity?

More often, you might hear people talk about donating rather than investing in a charity. More Kiwis than you’d realise donate to causes they want to support.

Once their donation has been made, they may not think further about the impact their contribution is making. Until recently, measuring the social impact of charitable services was uncommon, the lexicon between financial investment and philanthropic support poles apart.

But for us as donors and as investors, we are similarly making conscious decisions about how and where we choose to put our money based on personal values, experiences and the outcomes we would like to see them achieve. As the trend to consider broader impacts of financial investment on society beyond financial returns continues to grow, so too do the similarities in how we can think about investing in both businesses and charities.

Recognising information is limited about the impact value of New Zealand’s charitable sector to date, earlier this year, Jarden partnered with social analytics firm ImpactLab to develop a comprehensive snapshot of the sector’s impact across the country.

Using a measurement for Social Return on Investment (SROI), the just-released report from ImpactLab summarises their analysis of 108 programmes delivered by 84 organisations, representing $178 million, more than anyone has ever analysed from this perspective in New Zealand.

SROI compares the estimated social value of a programme to its cost, where social value is the estimated social impact in dollar terms that a programme achieves for participants over their lifetime.

Child, youth and family services, as well as education and financial literacy, are among the sectors benefiting from social investment. Photo / Getty Images

Through their analysis, ImpactLab identified three distinct investment approaches in New Zealand which could well become part of the Jarden team’s day-to-day conversations with our clients who have a philanthropic interest regarding what’s important to them in the investments they make.

These social investment categories are:

• Broad impact describes programmes that are typically lower in cost and larger in scale, delivering modest social value to many people.
• Balanced impact describes moderate cost programmes of varying scale that deliver varied social value, depending on the comprehensiveness of support and complexity of the population served.
• Deep impact describes higher-cost programmes delivering intensive support to a smaller group of people to achieve significant social change for that group.

Broadly, these categories provide a snapshot into the SROI a funder could expect to contribute when supporting different programmes, and they can be used as a tool for programme providers to explain the type of impact their programmes have on people.

Beyond this, the report adds more to the picture about the types of programmes our New Zealand charities specialise in.

It found that around 55 per cent of programmes serve 500 people or fewer (with 35 per cent of programmes targeting Māori and Pasifika communities), while 13 per cent of those served receive 73 per cent of the investment, and 75 per cent of investment flows into three sectors.

Those sectors are child, youth and family services; education, training and employment; and financial literacy.

What should we do with this information? It’s been a privilege presenting these findings alongside ImpactLab’s chief executive, Maria English, at events in Wellington and Auckland over recent days, and one of my personal highlights has been seeing how these insights are of value to both charities and donors alike.

By contributing to a greater understanding about how the charity sector adds value in our communities and at a national level, it’s our vision that we can have more informed conversations about social investment that are helpful for both the sector and individual charities.

The framework presented in the report has the ability to serve as a catalyst for creating more common ground between the investment and charity sectors, driving collaboration to deliver a better future.

Let’s move the conversation beyond talk about transactional donations and towards greater connections around investing in the social impact outcomes that mean the most to us personally.

Chris Wilson is managing director and head of wealth solutions at Jarden.

Disclaimer: This research has been prepared by Jarden Securities Limited (Jarden), which holds a licence issued by the Financial Markets Authority to provide a financial advice service. The information in this research solely relates to the companies and investment opportunities specified within. We recommend that you seek financial advice that is specific to your circumstances before making any investment decision or taking any action. Full disclaimer available at: https://www.jarden.co.nz/wealth-sales-and-research-disclaimer.

Jarden Securities Limited is an NZX Firm. A financial advice disclosure statement is available free of charge at: https://www.jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement/.